Mainland factor key to strong HK stock market
(Xinhua)
Updated: 2004-12-21 10:02

Thanks to the new listings of Chinese mainland companies, the market value of Hong Kong stock market hit a record high of 6.58 trillion HK dollars (854 million US dollars) so far this year.

This made the city the seventh largest stock market in the world, up from the eighth last year.

"Chinese mainland is the key to our market's strong result," Charles Lee Yeh-Kwong, chairman of Hong Kong Exchanges and Clearing (HKEx) noted in a forum held here earlier this month.

As of Dec. 10, the number of H share and red-chip companies amounts 27 percent of total 1,027 listed companies, and 30 percent of the whole market value.

In terms of new listings, mainland companies raised 71 billion HK dollars (9 billion US dollars) so far this year through Initial Public Offering (IPO), representing three quarters of the total.

Lee believed that total funds raised this year will reach 280 billion HK dollars, confirming Hong Kong as the world's second largest fund-raising market after New York. Meanwhile, the total stock market turnover this year will probably match the previous high reached in 1997, he added.

Analysts say that impact of Chinese mainland companies on Hong Kong stock market is not limited within these figures. While granting themselves a new channel of fund raising, mainland companies are propelling the development and stability of Hong Kong financial industry, contributing to Hong Kong as an international financial center.

A study made by Hong Kong Securities and Futures Commission (SFC) shows that Hong Kong stock market maintains a more diversified structure due to the increasing importance of mainland companies, which consist mostly of companies in the energy, telecom and industrial sector.

For instance, Hong Kong stock market used to be dependent on the property sector, which accounted for 31 percent of the total market capitalization as of the end of 1996, and now the percentage declined to about 11 percent. The energy sector accounted about 5 percent of the total market capital, but it would be negligible if mainland companies are excluded.

The listing of mainland companies has also widened the breadth of the Hong Kong stock exchange, and offers opportunities for international investors to share the fruits of the economic development of the mainland.

It's widely acknowledged that Chinese mainland is one of the fastest growing economies in the world, and mainland companies are contributors as well as beneficiary during the process. International investors could find a way to invest in mainland through trading shares of mainland companies listed in Hong Kong. In fact, mainland companies are more actively trading here. It accounts for 50 percent of the total trading volumes so far this year.

According to Mark Coggins, managing director of Financial Training Company, more investors and securities analysts will be lured by the fascinating mainland concepts, and thus facilitating the development of Hong Kong's securities industry.

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